Continued growth in renewables and energy sectors despite lower overall infrastructure investments

Breaking down trending sustainable* trades and themes to help those within Private Finance get ahead of the latest issues shaping the market.

Infrastructure investments – EMEA & Americas

  • Total equity investments into Infrastructure projects amounted to USD 26.3 billion in October, with almost USD 10 billion of debt also being issued (Figure 1) – this represents a 28% reduction from September activity, and half the monthly peak observed in March this year. 
  • In 2023 so far, most Infrastructure debt has been focused on the Renewables sector, equating to a quarter of all debt investments, followed by the Energy and Transport industries (Figure 2). The three sectors are also the focus of equity investments. Conversely, Infrastructure has shifted away from Commodities with 43% of equity deployed for Renewable and Energy projects, governed by the critical role of Infrastructure in achieving governmental net-zero targets within developed economies (including the UK).
  • Issuance via Capital Markets represents a small share of Infrastructure debt volumes, with capital deployment via loans now comprising 90% of the total.

Figure 1: Total infrastructure investments in Europe and Americas, year-to-date (YTD) 2023 – equity vs debt (USD billion)

Source: Infralogic, 10/11/23

Figure 2: Global Sectoral equity and debt deployment in Infrastructure, YTD 2023 (USD billion)

Source: Infralogic, 10/11/23

Sustainable deal activity

Infra fund-backed Go Ahead raises debt for growth and decarbonisation plans: Rail and bus group Go-Ahead has completed its first major debt raise since being taken private last year, securing the backing of more than a dozen lenders. The debt package, the size of which was not disclosed, also includes a seven-year private placement note provided by Pricoa Private Capital. In the UK, Go-Ahead operate a quarter of London’s buses and it also owns a regional bus network outside the capital. Out of its 5,925-strong bus fleet, 474 are zero-emission with another 512 in the pipeline.

Blackstone raises USD 930.43 million in public offering of sustainability-linked loan:
Blackstone announced that funds managed by Blackstone Real Estate have secured a landmark AUD 1.45 billion sustainability-linked loan (SLL). Japan-based MUFG Bank served as the sole sustainability coordinator in the transaction and worked with Blackstone to structure sustainability key performance indicators (KPI) across green property development, including ratings, green lease clauses and on-site solar installation projects.

Climate and ESG announcements by Sponsors (as of 7 November 2023)

KKR launches $2.8 billion global impact fund to invest in UN SDGs
Global private equity investor KKR announced that it has raised $2.8 billion for its second fund dedicated to investing in companies contributing towards the United Nations (UN) Sustainable Development Goals (SDG). The Global Impact Fund will focus on climate action, sustainable living, lifelong learning and inclusive growth SDG themes and will hence invest in companies that are aligning their commercial growth with creating measurable societal impact. [1]

Morgan Stanley Climate Fund invests in sustainable nutrition company, Huel
Morgan Stanley’s climate solutions private equity platform “1GT”, has announced a strategic partnership which will see the fund invest in UK-based sustainable nutrition company, Huel. As the food and beverage sector account for a third of global greenhouse gas (GHG) emissions, 1GT’s investment marks the strength of Huel’s sustainability credentials and confidence in the company’s net-zero aligned growth prospects. [2]

Gresham House forest growth fund raises £300m
Specialist asset manager Gresham House completed a £300m raise for its Forest Growth & Sustainability LP, reflecting strong demand for forestry as a sustainable natural capital investment delivering long-term stable returns. The capital raised will be deployed towards new productive woodland planting schemes in the UK as well as the acquisition of existing woodland for the production of sustainable commercial timber. [3]

DWS MEAG acquires biomethane producer Weltec
DWS, one of the largest asset managers in Europe, and MEAG, the asset manager of Munich Re and ERGO, announced the joint acquisition of German biomethane and biogas producer Weltec. Weltec owns and operates five biomethane and four biogas plants across Germany and, under its new owners, plans to upgrade its biogas plants to produce biomethane, known as a “renewable natural gas” attributed to its near-pure methane content. [4] [5]

CIP raises $2.1 billion for bioenergy, renewables infrastructure funds
Danish-based Copenhagen Infrastructure Partnership (CIP) raises $2.1bn for an energy infrastructure-based Advanced Bioenergy Fund (ABF) and Green Credit Fund (GCF). The ABF targets “dark green” investments in advanced bioenergy infrastructure to accelerate decarbonisation across hard-to abate sectors and deliver cost-efficiency and circular solutions for environmental and organic waste challenges. While the Green Credit Fund provides private project finance debt supporting renewable energy projects in Europe, North America and APAC. [6]

STX group announces new Global Carbon Fund to catalyse investments in carbon compliance markets
Corporate climate and environmental solutions provider, STX Group, launches its first carbon investment fund in partnership with Luxembourg-based fund manager, Funds Avenue, and ETS trading house Vertis Environmental Finance. The newly created Vertis Global Carbon Fund is expected to raise $250 million and seeks to capture price appreciation in the rapidly growing, illiquid global carbon compliance markets. [7]

Macquarie Asset Management announces $325 million investment in Atlas Agro
Macquarie GIG Energy Transition Solutions fund has closed an up to $325 million investment in Atlas Agro, a Switzerland based chemical manufacturing company, to help it scale nitrogen fertiliser plants utilising green hydrogen in its production process. The investment will enable Atlas Agro to continue its expansion across the Americas and globally, assisting its ambition of providing a sustainable alternative to conventional fossil-fuel based fertiliser products which contribute heavily to GHG emissions. [8]

BlackRock launch ESG-focused private credit fund
BlackRock has launched the Climate Transition-Oriented Private Debt Fund, as part of its ESG-focussed investing platform worth more than $100bn globally. The fund aims to invest in US and European middle market firms with climate-transition goals or leading climate solutions, and is expected to engage on the implementation and delivery of their carbon reporting and decarbonisation targets. [9][10]

Specialist global impact investor Blue Earth Capital closes credit fund above $100 million target
The Swiss-based investor Blue Earth Capital raised $108.5 million for its second credit impact fund which increased its total assets under management (AuM) to over $1 billion across its private credit, private equity, funds and co-investment strategies. The credit impact fund aims to improve access to education, financial services inclusion, healthcare and affordable housing for underserved demographic groups in developing markets. [11][12]

ESG data, articles and market initiatives

Data platform Forest IQ launches, to support financial institutions achieve deforestation-free portfolios
Developed by Global Canopy and ZSL, Forest IQ was launched earlier in November to enable financial institutions (FI) to easily screen portfolios, manage deforestation risks and achieve their climate and nature targets against the backdrop of growing policy and compliance pressures. The platform provides FIs with the ability to assess and benchmark companies on deforestation along with the ability to drill into over 2,400 indicators on deforestation, conversion and human rights abuses. [13]

ESG Data Convergence Initiative (EDCI) prepares for the 2024 data collection cycle
Launched in September 2021, EDCI is a coalition of over 350 general partners (GPs) and limited partners (LPs) committed to increasing the availability of standardised ESG metrics for private markets to simplify reporting of ESG performance as well as enabling comparison and benchmarking. In 2023, the initiative collected more than 62,000 ESG data points from portfolio companies and have announced three new net-zero related metrics to be adopted in the 2024 cycle. [14]

Munich-based Landbanking Group receives €10.5 million to launch an investment platform for natural capital
The Landbanking Group, a financial market infrastructure company, has launched a €10.5 million management and investment platform, Landler, to finance and monitor nature equity. As a novel concept, nature equity was developed to enable land stewards such as farmers and foresters, conservancies, landowners and land funds or trusts to accrue natural capital by transforming nature uplifts into tradable assets. The announced financing will enable Landbanking to expand its customer base in the agrifood sector and address new markets in infrastructure, energy and financial services. [15]

Auquan raises $3.5m to accelerate generative AI for financial services, turning unstructured data into intelligence
AI-powered insights provider, Auquan, raises $3.5m to help financial services clients extract key insights from unstructured data. Auquan’s Intelligence Engine surfaces prospects for private equity sponsors during deal sourcing and identifies ESG risks and developments typically hidden within company supply chains. [16]

Yaletown Partners select Novata to advance ESG data collection
Vancouver-based venture capital firm Yaletown Partners announced that it has selected Novata, an ESG data management platform for private markets, to be used to support ESG measurement and analysis. Yaletown’s investment platform has focused on driving sustainable digital transformation across growth-stage technology firms and seeks to leverage Novata’s solutions to further integrate ESG in their investments to drive value and reinforce climate-resilience in their portfolio companies. [17]

European Leveraged Finance Association (ELFA) launches insights report: “CLO Carbon and Climate Disclosures: Methods for Enhancing Transparency”
To address the growing investor demand for ESG integration within collateralised loan obligations (CLO), ELFA has published guidance for CLO managers to measure and report on portfolio level GHG emissions and economic emissions intensity metrics. The guidance includes a methodology to help managers capture the metrics at the borrower level and stylised examples for reaching a portfolio level aggregation. The guidance also advocates for CLO managers to disclose the proportion of emissions data derived from reported data and estimated data, to uphold transparency. [18]

Morningstar research finds asset owners continue to increase allocations to ESG investments despite growing challenges
Through an annual survey of 500 asset owners across North America, Europe and APAC, Morningstar finds that the majority of asset owners believe ESG is material to the investment process, with ‘climate’ and ‘achieving net-zero by 2050’ as the highest priority. The survey also finds that all asset owners are allocating their assets towards ESG strategies and the proportion of those allocating at least half of their assets to ESG strategies have increased from 30% to 34% since 2022. Asset owners have identified growing frustrations in ESG implementation owing to the lack of standardised and relevant data, as well as lack of clarity on reporting regulations and rising costs emerging as primary pain points. [19]

Upcoming webinars and events

UN Climate Change Conference – COP28 (30 November-12 December 2023, UAE)
COP28 will be hosted in the UAE with a two-week thematic programme, geared towards real world solutions that close the gaps to 2030 and respond to the first global stocktake since the Paris Agreement. The conference aims to unite a diverse range of stakeholders – all levels of government, youth, business and investors, civil society, frontline communities, and others – around specific solutions that must be scaled up this decade to fast-track the energy transition, build resilience and mobilise finance at scale. Additional details of the event.

ESG and Climate Summit 2023 (7 December 2023, London)
The PMIs annual ESG & Climate Summit will bring together specialists in the fields of sustainability, impact investment, the Task Force on Climate-Related Financial Disclosures (TCFD) and stewardship to discuss the latest developments in ESG for the pensions industry. There will also be input from outside the world of pensions to hear about the environmental challenges facing communities and wildlife because of climate change. The forum will be an opportunity to share knowledge to help grow sustainability within the industry and to network with specialists in the ESG space. We look forward to creating a platform for in-depth and constructive discussions in this topical and fast-moving area. Additional details of the event and a link to register.

EIOPA’s 7th Sustainable Finance Conference (14 December 2023, Virtual)
The 2023 EIOPA Sustainable Finance Conference is set to gather regulators, insurance and pension industry specialists and stakeholders to critically assess efforts in delivering on sustainability goals and the increasing societal vulnerabilities stemming from climate change. 

  • The conference will host a panel discussion and a number of sessions to cover the following:
  • Evaluating the impact of sustainability disclosures (Sustainable Finance Disclosure Regulation (SFDR), Corporate Sustainability Reporting Directive (CSRD), sustainability labels and transition plans)
  • The financial sector’s coordinated climate scenario analysis
  • The challenges and opportunities in biodiversity and social risks
  • How to improve and share knowledge on natural catastrophes

Additional details of the event and a link to register.

PEI – Responsible Investment Forum (20 February 2024, New York) 
The Responsible Investment Forum: New York, co-hosted by the PRI, returns for its eighth year on 20-21 February, bringing together sophisticated institutional investors, fund managers & advisors. The forum will be an opportunity to gain valuable insight into what investors are looking for when allocating to private equity, and to set the direction for your responsible investment strategies. Additional details of the event and a link to register.

For those looking to discuss any of the above further, please reach out to our authors:

  1. Reuters.com: KKR raises $2.8 billion for second global impact fund
  2. Morganstanley.com: Huel unveiled as latest addition to Morgan Stanley Investment Management’s 1GT climate private equity strategy
  3. Greshamhouse.com: Gresham House Forest Growth & Sustainability LP closes with target of £300mn in total commitments raised
  4. DWS.com: DWS and MEAG acquire Weltec, a leading German biomethane producer
  5. IEA.org: An introduction to biogas and biomethane
  6. Esg-investing.com: CIP Raises $2 Billion For Bioenergy, Renewables Funds
  7. Carbonherald.com: STX Group Announces New Global Carbon Fund
  8. Macquarie.com: Macquarie Asset Management announces investment in Atlas Agro
  9. Esginvestor.net: BlackRock Fund Supports Middle Market Transition
  10. Funds-europe.com: BlackRock debuts climate transition-focussed private debt fund
  11. Impact-investor.com: Swiss-based Blue Earth Capital closes credit impact fund above $100m target
  12. Blueearth.capital.com: Blue Earth Capital reaches $1 billion AuM as it closes Credit Strategies fund above $100 million target
  13. Globalcanopy.org: Forest IQ – a new ally for financial institutions on their journey towards deforestation-free portfolios
  14. Bcg.com: Sustainability in Private Equity, 2023
  15. Eu-startup.com: Munich-based The Landbanking Group bags €10.5 million to launch an investment platform for natural capital
  16. Auquan.com: Auquan Raises $3.5M to Accelerate Generative AI for Financial Services, Turning Unstructured Data Into Intelligence
  17. Yaletown.com: Yaletown Partners Select Novata to Advance ESG Data Collection
  18. Elfainvestors.com: European Leveraged Finance Association Launches Insights Report: “CLO Carbon and Climate Disclosures: Methods for Enhancing Transparency”  
  19. Esgtoday.com: Asset Owners Continuing to Increase Allocations to ESG Investments Despite Growing Challenges: Morningstar

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